Sarepta Plunges 8.66%: Can Gene Therapy Woes Be Contained?

Summary
• Sarepta (SRPT) slumps 8.66% to $11.76, marking its worst intraday drop since 2022.
• European regulators reject Elevidys for Duchenne muscular dystrophy, deepening regulatory scrutiny.
• FDA halts U.S. shipments of Elevidys after patient deaths linked to gene therapy.

Sarepta’s shares face a relentless sell-off amid dual regulatory setbacks for its flagship gene therapy, Elevidys. The stock’s 9% intraday plunge—amid a 12-month loss of 92%—reflects investor panic over safety concerns and commercial viability. With Roche halting EU shipments and the FDA demanding additional trials, the biotech’s path forward appears perilous. Key levels like the 52-week low ($10.415) loom as critical support.

Regulatory Rejection Sparks Sharp Decline in Sarepta Shares
Sarepta’s 8.66% intraday collapse stems from a perfect storm: the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) rejected Elevidys for Duchenne muscular dystrophy patients aged 3–7, citing insufficient efficacy. This follows the FDA’s abrupt request to pause U.S. shipments after three patient deaths linked to Sarepta’s gene therapies. Roche, Sarepta’s EU partner, faces a 15-day window to request a reevaluation, but analysts rate success as 'very low.' Compounding the crisis, Sarepta’s cash flow is under pressure from looming debt payments and licensing obligations to Arrowhead Pharmaceuticals.

Biotech Sector Weak as AMGN Drags, Sarepta’s Woes Outpace Peers
The biotechnology sector, led by Amgen (AMGN), drifted lower with a 0.48% intraday decline, reflecting broader investor caution. While AMGN’s decline is modest, Sarepta’s 9% plunge underscores its unique vulnerability. Unlike peers focused on stable oncology pipelines, Sarepta’s reliance on high-risk, high-reward gene therapies has amplified its exposure to regulatory missteps. The sector’s underperformance highlights the fragility of speculative biotech plays amid rising safety scrutiny.

Bearish Options and ETFs: Navigating Sarepta’s Volatility
• 200-day average: $83.67 (far above current price)
• RSI: 36.39 (oversold)
• MACD: -3.88 (bearish divergence)
• Bollinger Bands: Price near lower band ($12.25)

Sarepta’s technicals paint a dire picture: oversold RSI, bearish MACD, and price action near the Bollinger lower band suggest further downside. Aggressive short-term traders may target the $10.415 52-week low as a critical support level. With no leveraged ETFs available, options remain the primary vehicle for positioning.

Top Options:
1. SRPT20250801P11.5 (Put)
- Strike: $11.50 | Expiry: 2025-08-01 | IV: 117.91% | Delta: -0.389 | Theta: -0.0206 | Gamma: 0.1848 | Turnover: $11,828
- IV: High volatility reflects market pessimism.
- Delta: Moderate sensitivity to price moves.
- Gamma: Strong sensitivity to gamma ensures option value accelerates downward.
- Payoff: At 5% downside (target $11.17), profit = max(0, $11.17 - $11.50) = $0.00 (break-even at $11.50).
- Why: High IV and gamma make this put ideal for a sharp post-approval drop.

2. SRPT20250801C12.5 (Call)
- Strike: $12.50 | Expiry: 2025-08-01 | IV: 115.02% | Delta: 0.4186 | Theta: -0.0739 | Gamma: 0.1930 | Turnover: $23,742
- IV: Elevated but balanced for a moderate rebound.
- Delta: Moderate directional exposure.
- Gamma: High sensitivity to price swings.
- Payoff: At 5% downside (target $11.17), profit = max(0, $11.17 - $12.50) = $0.00 (break-even at $12.50).
- Why: High gamma and IV position this call to benefit from volatility spikes, even in a bearish scenario.

Action: Aggressive bulls may consider SRPT20250801C12.5 into a bounce above $12.25. If $11.50 breaks, SRPT20250801P11.5 offers short-side potential.

Backtest Sarepta Stock Performance
The backtest of SRPT's performance after a -9% intraday plunge shows mixed results. While the 3-day win rate is 48.01%, the 10-day win rate is 49.76%, and the 30-day win rate is 46.09%, indicating a higher probability of positive returns in the short term, the actual returns over these periods are negative, with a maximum return of -0.13% over 30 days. This suggests that while there is a decent chance of a bounce-back, the downside risk is significant, and the overall performance remains lackluster in the aftermath of such a large intraday dip.

Sarepta’s Descent Continues: Watch for Liquidity and Regulatory Clarity
Sarepta’s freefall reflects a crisis of confidence in its gene therapy pipeline, with regulatory and safety issues overshadowing long-term potential. While the RSI near oversold levels hints at potential rebounds, the 52-week low ($10.415) and cash flow pressures suggest further declines are likely. Investors should monitor Amgen (AMGN) for sector sentiment and watch for a breakdown below $11.12 (intraday low). Immediate triggers include FDA reevaluation outcomes and Roche’s reexamination request. Action: Liquidate long positions and prioritize bearish options if the $11.50 level fails.